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At Palmetto Promise Institute, we believe the best solutions don’t come from Washington — they come from communities. That’s why we were alarmed to see the U.S. House propose a steep tax hike on private foundations, raising the current 1.39% excise tax on investment income to as high as 10%. It was encouraging to see the Senate Finance Committee reject that provision in their initial amendments to the bill, but the fact that such a drastic measure passed the House should serve as a warning: charitable giving is increasingly being viewed not as a public good, but as a potential source of government revenue.
Here in South Carolina, thousands of small, locally run organizations depend on foundation grants to serve their neighbors—feeding families, caring for veterans, strengthening schools, and responding to disasters. These nonprofits are efficient, accountable, and mission driven. When foundations are taxed more, charities get less. It’s that simple.
Some argue the House’s proposal is about fairness. But philanthropy isn’t about profits—it’s about purpose. In 2023, Americans donated over $557 billion to charity—most of it from individuals, not corporations. People give because they care, not because they expect something in return. Penalizing charitable giving with higher taxes will only discourage generosity, and the communities that rely on that support will suffer.
At a time when giving is already in decline, why make it harder for Americans to support the causes they believe in?
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This proposal also undermines a core conservative principle: the belief that civil society—not big government—is best equipped to solve problems. Nonprofits are an alternative to bureaucracy. They move faster, innovate more, and stay close to the people they serve. Unlike government programs, which often grow without accountability, charities are funded voluntarily and succeed by earning public trust.
Consider this: 92% of U.S. nonprofits operate on budgets under $1 million a year. These are not bloated institutions. They are food banks, pregnancy centers, job training programs, and shelters. They fill gaps government simply cannot, and they do it on tight margins with private support.
For decades, policymakers have recognized that private giving strengthens civil society. That’s why nonprofits receive tax-exempt status in the first place. Raising taxes on foundations sends the wrong message—and risks undoing the work of thousands of community groups that step in where government can’t.
Palmetto Promise Institute urges South Carolina’s congressional delegation to remain vigilant and ensure that any final version of this legislation protects philanthropic giving. Congress should stand with the volunteers, nonprofits, churches, and local leaders who give their time and resources to serve others. Doing so would send a clear message: we trust our communities, we value local solutions, and we believe in the power of South Carolinians to take care of their own.
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ABOUT THE AUTHOR…
Palmetto Promise Institute was founded in 2013 by former U.S. senator Jim DeMint. Its mission is to “promote policy solutions to advance a free and flourishing South Carolina, where every individual has the opportunity to reach their full, God-given potential.”
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